Op-Ed: Moving the point of obligation is the latest misguided ploy to undermine the RFS

Source: BY SENS. JONI ERNST (R-IOWA) AND TAMMY DUCKWORTH (D-ILL.), The Hill • Posted: Friday, March 31, 2017

Six billion gallons. That is the approximate amount of ethanol produced in Iowa and Illinois each and every year. It is more than the annual gasoline equivalent production of some Organization of the Petroleum Exporting Countries (OPEC) members.

Six billion gallons is enough to drive a pickup truck around the Earth six million times, but more importantly, it is enough to drive the rural economies that are the lifeblood of our respective states.

The Renewable Fuel Standard (RFS) dramatically increased ethanol and biodiesel production over the last decade, and today, the biofuels industry is driving investment across the region. The RFS has been a critical piece of our domestic energy revolution, offsetting billions of barrels of foreign oil that would otherwise have been imported as our dollars went overseas.

This Made in America energy supports tens of thousands of jobs across the country, and has an economic ripple effect throughout farm country, rural communities and the entire nation.

Over the lifespan of the RFS, the only impediment to the program’s success has been uncertainty. Uncertainty delayed investment in 2nd generation biofuel research and infrastructure in our country, pushed proposed production plants overseas, and hampered job creation. And this uncertainty has come in many forms: delayed annual volume requirements from the Environmental Protection Agency (EPA), unpredictable expiring and retroactive tax credits for biodiesel, vacillating support in Congress, and—most recently—attempts to move the so-called “point of obligation,” which currently requires petroleum importers and refiners to meet certain ethanol inclusion goals, away from refiners and onto downstream entities – blenders and retailers.

This latest attack is simply another tactic that aims to inject further uncertainty into the program, create a compliance nightmare, and upend the market dynamics that have led to expanded consumer acceptance of renewable fuels. When the EPA structured the RFS program, it placed the point of obligation with the petroleum refiners and importers to keep regulatory complexity to a minimum and to incentivize those parties to provide petroleum blendstock suitable for the inclusion of renewable fuels.

Moving the point of obligation downstream to blenders would significantly increase the number of parties obligated to meet the goals from a few hundred to many thousands. This would create a compliance nightmare for both the EPA and the numerous newly-obligated parties, many of whom would be small and mid-sized retailers with no experience in dealing with this level of regulatory compliance. More importantly, shifting the point of obligation downstream would leave the refiners with little incentive to provide the appropriate gasoline blends, hanging the retailers out to dry.

The cost of such a move would ultimately be borne by the American consumer. Retailers would no longer have an incentive – or may lack the capability – to provide higher blends of ethanol, such as E15 and E85, which have been lower cost options at the pump. It could also decrease competition and leave the remaining players – the refiners – able to raise prices accordingly.

Attacks on renewable fuels and the RFS will undoubtedly continue in the days and years ahead, and we will work tirelessly to push back on them. As Veterans who have fought to defend this nation, we have seen firsthand the price we pay for our dangerous dependence on oil imported from our adversaries.

During the campaign, Donald Trump expressed his support for the RFS. Now, as president, we are asking him to reaffirm his support for the RFS by maintaining the current point of obligation. Doing so will put an end to the continuing attacks on the RFS policies that help drive our nation’s economy.